BOE raises bank rate by 50 bps to 1.75%, as expected

• Prior 1.25%
• Bank rate 9-0* vote vs 9-0 expected (*Tenreyro voted to raise rates by 0.25%)
• Labour market remains tight, domestic cost and price pressures elevated
• Estimates Q2 GDP to fall by 0.2% (June forecast was -0.3%)
• Sees Q3 GDP increasing by 0.4%
• Risks surrounding projections are exceptionally large at present
• Inflationary pressures are nevertheless expected to dissipate over time
• But there is a risk that a longer period of externally generated price inflation Inflation Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Read this Term will lead to more enduring domestic price and wage pressures
• Policy is not on a pre-set path
• BOE will be particularly alert to indications of more persistent inflationary pressures, and will if necessary act forcefully in response
• Full statement

After a bit of a whipsaw, the pound has fallen on the decision as the BOE takes a page right out of the RBA playbook. In terms of the forward guidance, they added the passage that "policy is not on a pre-set path". As for the inflation outlook, the BOE sees consumer inflation overshooting towards 11% with a staggering peak of 13% in the UK.

On the economy, the BOE views five quarters of negative GDP starting from Q4 2022 - the longest recession period since the global financial crisis. Oof.

All in all, this still reads out more like a one-and-done 50 bps rate hike considering the economic outlook. Cable has fallen down to 1.2095 at the moment.